All right, good afternoon, everybody.

Uh, we're gonna call the order the administration investment and fiscal management board meeting for February 19th.

Uh Madam Clerk, can you please call the roll?

Yes, thank you, Chair.

Member Kolbu?

Yeah.

Member Tool.

Here.

Oh, Tool, excuse me.

Member Tamayo?

Here.

Member Zammi Sumny.

Absent.

And Chair Coletta.

I am here.

Would everyone please rise for the land acknowledgement and pledge of allegiance?

To the original people of this land, the Nissanon people, the Southern Maidu, Valley and Plains Vok, Patwin Wintoon peoples, and the people of the Wilton Rancheria, Sacramento's only federally recognized tribe.

May we acknowledge and honor the native people who came before us and still walk beside us today on these ancestral lands by choosing to gather together today in the active practice of acknowledgement and appreciation for Sacramento's indigenous people's history, contributions, and lives.

I pledge allegiance to the flag of the United States of America and to the Republic for which it stands, one nation under God, individual with liberty and justice for all.

Okay.

So we'll move on to the consent calendar.

Do we have a motion?

I'll move it.

Six seconds.

Do we have any uh public comment?

No, we do not.

Thank you.

Do we have any board member comments or questions?

Okay.

So all in favor, please say aye.

Aye.

Oppose abstentions.

Uh so it passed.

So we'll move on to the discussion calendar.

Uh, item number four, the SCARS quarterly investment report.

Good afternoon.

Um, I'm gonna actually be going first today.

I know the order got reversed, um so I'm gonna touch on a couple quick points on our internal quarterly report, and then Jeff will go over the Siegel report and some bigger um picture on uh markets.

So the first thing I wanted to point out in the quarterly report is in the fixed account, we did um make quite a few changes.

During the quarter, we raised about three and a half million dollars out of the equities that had really run up quite a bit.

So we opted to liquidate those and send those over to the fixed fund.

So you can see that contribution sitting there on that page seven that says 3.5 million.

So that's what that was.

Um so we continue to put funds to work in that account over four percent.

Um we are, however, starting to see some uh bonds get called in the four to five percent range.

There are very few bonds in the account that are callable.

I tend to look towards bullets, but there are some bonds that we have seen taken away.

Luckily, because the curve hasn't moved too much and interest rates have been fairly stable, we have been able to reinvest it.

Um the current income on the account is about 4.5 million as of today, and that's up from 2.6 million in 2122.

Uh moving on to the large cap account.

Get there.

Um so on the large cap account, the midpoint of the year uh returns were in the double digits.

It's really been uh very strong equity year up until probably the last two to three weeks, I would say.

Um and again, as those continued to go up, we did liquidate from those, so you'll see a withdrawal on that, and that's gonna be a combination of the assets we sold and a combination of the dividends being swept out for the operating account.

Likewise on the equity income account for the first half of the year, it had a very strong return approaching double digits there at nine um 9.35 for the first six months of the year.

And again, the 5.2 million in withdrawals you'll see there is the combination of the dividend sweeping out and the money going back over to the fixed fund.

Um so in January, another um move that we did that you won't see until the next quarterly report is we had several bonds in the fixed income account that were sub-2%, and so we opted to do swaps on those, and so now there are no more bonds in the portfolio that are under two percent.

Um and additionally, we raised some funds for out of the equity accounts for the operating account.

And so we now have sitting in the sitting in each equity account all the funds to take care of operating all the way through July 1st, 2026.

As a result of the run-up, we just thought it would be prudent to lock those gains in, sit in cash so that if we started to see more volatility, we would not be forced sellers going into the rest of the fiscal year.

Um so you won't see any of these transactions until the next quarter, but I just wanted to let you let you know what we've done in the month of January since this report was taken.

Other than that, I just wanted to update, we mentioned the full liquidation strategy in the last meeting.

Nothing has been done on that.

We are continuing to monitor it.

As of January, the fund overall was actually at a 9.5%.

Our internal bogey that we've talked about is an overall return of 10% to lock in, 4% greater than the actual.

So we're watching it at the end of January.

We got very close to 7,000 on the SP, which is one of the triggers we were looking at.

There was a lot of excitement over the Dow crossing 50,000, but it is such a narrow index, it's really not something that we're we're watching.

We'd rather watch the broader SB for the 7,000.

So we'll continue to watch that and see if that is something we are going to do.

But that is one of the reasons that we did the pre-sale of all the operating funds, just to in a small way to take advantage of the run-up in the equities.

So we're sitting on about two to three percent in cash right now in the overall funds, and those are those will be allocated to the operating fund as the months go on.

And that's all I have.

It's that triggered.

We're going to cash.

Yep, thank you.

Um, are there any other member comments?

No, were there any public comments?

Thank you.

She have no public comments.

Uh so is there a motion to accept the this uh December report?

Probably.

Second.

Yeah, okay.

Uh, all those in favor, please say aye.

Aye.

Opposed abstention, it passes.

Uh, so we'll move on to the quarterly investment report.

Okay, thank you.

Um, get ours called up here.

Yeah, here we go.

Uh let me just talk a little bit about what's went on in the markets last year.

And and the point I want to make, and it ties in with what Stacey was saying.

So the SP 500 was up, you can see almost 18 percent in calendar year 2025.

That's three consecutive years of double-digit returns.

The two prior years were 25% plus.

Um, I I think only two or three times in history have there been four such consecutive years of double-digit returns.

So we'll see what happens this year, but uh very unusual to string that many years that are so good back to back to back to back.

Um, and interestingly, I think in the in the markets last year, especially towards the end of the year, we started to see changes.

It you know, in the prior years, it had been the Mag 7.

Well, there was still some of that going on.

There's a lot of AI related uh themes running through the market, but in the fourth quarter, we saw broadening out, we saw value stocks start doing better.

Look at the table in the bottom right, healthcare was up almost 12% in the fourth quarter.

That tends to be a defensive sector.

Yeah, for the year, IT and communication services still still one, but but you had you know strong returns from from other sectors too.

And so far this year, I it's it's that's really exacerbated uh that it's it's been the the more defensive type things that that have done better.

Uh broadening out is probably healthy.

You know, it's not all just five or seven stocks that are that are driving things.

I also wanted to just point out the the yield curves here on this page.

So the Fed obviously did two rate cuts in the fourth quarter, October and December.

Um haven't done anything since.

And based on the recent minutes of the last meeting, it kind of looks like they may be sitting still for a while.

We'll we'll see.

It'll depend a lot on the data.

Uh, inflation and and jobs and economic strength.

Um, but the the long-term rates you can you can see in the chart at the top have been very sticky, and and that's really that inflation concern.

I I think that's you know, if you're gonna tie your money up for a long time, you want to be sure it's gonna be worth something.

And so that's helped keep longer term rates up while the while the Fed you know can control the short term, and you can see they've pushed that down.

The green line is is where we ended December.

The brown line is with June, and then the gold line is September.

So short-term rates have been coming down, uh, at least through the end of the year, but long-term rates, very very sticky.

So you've got a pretty steep yield curve here, which it wasn't that long ago.

You had an inverted yield curve.

Uh so things have definitely changed in in the bond market.

Still a lot of underlying volatility, uh, but you know, a very solid returns for from bonds.

I mean, the broad market index was up over seven percent last year.

Okay, that's that's pretty good.

So you put all that together, you're gonna see some strong returns out of these portfolios, and Stacy's already alluded to that.

Um here I just wanted to show you these are the allocations, uh, the last two quarter ends.

Uh so a little under in large cap growth, a little bit over in fixed income.

This is as of of year end.

The I'm looking at the bars on the left.

Cash at that point was one percent percent.

I think Stacy said it's now above above that because some additional cash raises.

But this is uh, you know, I'll still still pretty close to target.

And then here are the returns.

Uh so two and a half percent for the quarter, almost seven and a half percent for the fiscal year, the first six months, Stacy said, and you know, tuck another couple percent on top of that uh in January.

Uh calendar year up 13 percent, uh, you know, well, more than double the actuarial uh rate uh ahead of the custom benchmark as well, and and those comments apply across the board.

And I I think especially if you look out, you know, five, seven, ten years, uh well ahead of the actuarial rate over those time periods, as well as ahead of the custom benchmark.

And then if you look down at the individual components, both of the equity portfolios outperformed their benchmarks in the quarter and for the year.

Uh and bonds right in line with the benchmark in the quarter and and outperformed for the for the calendar year.

Uh so again, just very healthy returns uh across the board there.

Uh two other things I wanted to point out.

I'm gonna skip ahead a number of pages here.

Excuse me.

Just on the equities.

These charts on the left are the risk return charts over three and five years.

So your total domestic equity portfolio is the blue box, less volatile than both the SP 500 and the uh overall uh benchmark for the plan.

So those strong returns have been generated with less risk, uh less volatility uh over both the three and five year periods.

Um that's that's good to see.

Uh and then just one other thing.

I'm gonna go to the very last page of our report thinking about uh you know potentially increasing fixed income exposure some more.

Uh it has been done in the past.

Um so give me one second to get all the way back there.

All right, so here's where we show what the the benchmarks have been over time.

If you look sort of in the middle there, the March 08 uh or or uh to March 09 period, you see 50% in Bloomberg aggregate bond index.

So fixed income was 50% of the portfolio back then, and that's of course financial crisis.

But even before that it was 45%.

So uh, you know, having having a substantial portion of the portfolio in in bonds uh has been done before.

Uh right now you're at 40% for for your target, but it's not like this has never been more conservatively invested.

It has, if if you go back there.

So that's that's really all I had on that, unless there's any questions.

Or any member questions or comments.

Just one question.

There we go.

Just a question about the the magnificent seven.

I know it's everyone wants to ask about that probably.

And if you don't know, that's fine.

But what I seem to be hearing, had heard a couple years ago, so it was sort of a consistent statistic that the magnificent seven were about uh 30 percent of um I I think the market.

Um, I don't think it was SP.

I think it was just well, yeah.

Anyway, is that has that changed?

Is there a new metric?

And if you don't know, that's fine, but is there is there a new talking point on that?

Um so you're talking about how much the MAG 7R as a weighting for the SP.

Yeah.

They still are um significant.

Um I don't know.

But even with the fluctuations, they've just gotten so big.

I mean, really, we've talked internally, we do have a small um a small position in RSP, which is the equal-weighted SP 500, which is a different way to look at it, you know, to it kind of takes out the noise of those top seven.

And one of the reasons that we're outperforming in the large cap account is because the only exposure we have to those really volatile names is is through the SP is through the SPY.

So we're not playing that game right now, so it's working out very well, but they still are uh a very significant portion of the SPY.

Fortunate or unfortunate.

So thank you.

Yeah, and and what's changed is the the few stocks that make up the they're they're not quite the same seven.

Uh like Tesla obviously is been somewhat weak, and even Apple has been somewhat weak.

But but some of the drug companies, because of the GLP1 drugs, you know, have jumped in there.

Uh so the the makeup is changed a little bit, and they don't have a nice new catchy name for them, but but the idea that yes, you know, 30 some odd percent is made up of you know the top few stocks make up that much of the the benchmark, yes.

Yeah, we have any other uh member questions, comments um do we have any public comment?

Thank you, Chair.

No, we do not.

Okay, uh, I think we need a motion to accept the report.

I'll move approval.

Second.

Okay.

Uh all those in favor, please say aye.

Aye.

Opposed to abstentions.

All right.

Uh next is the financial.

Uh oh, sorry, go ahead.

Well, one other thing just as our as I wrap up.

Um, I just wanted to let you know that I am planning to retire later this year.

Um, I will be at the next meeting.

Uh and uh the guy who's gonna take over for me, his name is David Roll.

He will he will be here.

He just unfortunately couldn't come today, but but he'll be here for the next meeting.

He's uh a new hire a few months ago for us, but very experienced in both consulting and investment management.

So you'll get to meet him uh at the next meeting.

But I just just wanted to give you a heads up that that uh that was coming.

Okay, uh Oswaldo.

Is this working?

Yep.

Okay.

Um hello, Zabalo Lopez, finance manager, departmental finance.

Uh today I will be presenting the results of the financial statement audit related to the Sacramento CD employee retirement system scarce for the year ended June 30 uh 2025.

So the financial statements for SCURS were audited by the independent audit firm Macias Giniano Cono, MGO.

And I'm pleased to announce that we receive an unmodified opinion.

Uh this is the best kind of opinion that you can get.

It means that there was a green audit.

If you want additional information for the opinion, you can refer to pages 13 through 15 of the financial report.

Um, let's see the display.

Is this working?

Okay.

So that's that's kind of small, but that's page 20.

Um of the report.

Uh this what I want to mention here is uh basically the net position restricted for pension.

There was almost no change during the year, so the net position decreased from uh 253.5 million to 253.4.

So as I mentioned before, almost no changes.

This means that total assets, total liabilities, they were very consistent.

So I'm not going to go into detail on each line item because there were no major changes.

So I'm going to now moving on to the next page.

This is page 21 of the report.

This shows the statement of changes in planned for the training net position.

Um here we can see one of the things that I want to mention is the employer contribution uh on the top.

Um here.

So the contributions during fiscal year 24 were 1.4 million.

This is very consistent with last year, also 1.4 million.

Uh they are going to decrease when forward.

Um the net investment income, it also decreased from uh 13 uh 30.5 million in fiscal year 24 to 26.3 million in fiscal year 25.

This is the biggest change that we can see on the report.

Uh the main reason for the decrease was the net appreciation in the fair value of investment, which uh was 19.4 million in fiscal year 25 compared to 23.

Uh finally on this page uh as we can see the benefits payments, they were very consistent.

27 million in fiscal year 20.

Uh yeah, 27 million in fiscal year 24.

Uh it decreased to 26.4 million in 25 here.

This is page 29 of the report.

Uh one of the things that I want to mention here is that the city net pension asset.

Yeah, we have an asset instead of a liability, which is pretty good.

Um, as of 6, 3025 is 22.1 million.

This is an increase in the net pension asset of 18 million when we compare it to the previous year, um, where the balance was 4.1 million.

Also, the funding status increased from 101.6% in fiscal year 24 to 109.6 percent in fiscal year 25.

There are additional details if you want to see why it fluctuates, it changed uh in pages four, five, and six of appendix B.

Um so finally, the last thing that I want to mention, as we know this is a close plan, and therefore the plan is getting smaller.

The total plan members decrease from 739 members in fiscal year 24 to 710 members in fiscal year 25, with only one active active plan member as of 6325.

Uh with that, I conclude my presentation and I'm open for any questions.

Thank you.

Thank you.

Are there any um member questions or comments?

No, any uh public comments.

Thank you, Chair.

We know the public comments.

And this is uh receive and file, so uh we'll move to the next thing, Oswald.

Thank you.

Uh we'll move to the next item, which is the selection of chair and vice chair for calendar year 2026.

And I think since Yusuf's not here, gets it.

I don't know when their terms are off.

When is do you know when your terms are?

Uh I don't know.

And so I mean, I'd love to have new mode up here.

I have a little script I can read.

Sure, like all right, good afternoon.

This is Rosanna Matasinos from the city clerk's office.

All the detailed information is your staff report, but I have a few reminders.

We will hear nominations and vote for chair first, then followed by vice chair.

The newly elected chair and vice chair will begin their terms the next regular meeting.

Members may nominate another member of themselves.

And please remember that a member may not serve more than two calendar years in either position.

As such, member bader is eligible to serve as chair, and member Colville is eligible to serve as vice chair.

If you wish to make a nomination, you may answer your question or no?

We don't have a member Vader.

Oh, no longer.

You did such a good job.

You did such a good job.

We're bringing you back, Jason.

I apologize.

I still don't looking at your eyes.

I was like, wait, did I use something?

So I apologize.

So it looks like I stole him.

So vice chair, uh, John Colville, you've done two years, and so you're out for vice chair, but you can be elected for chair.

Um, so we could do vi um chair first.

There are the nominations.

Pardon my interruption.

Jacob Redworth from the city clerk's office.

Both uh member O'Toole and members of Manudin's uh uh terms expire at the end of this year.

So the end of 2026.

Thank you.

Thank you.

Have a motion.

Sure, yeah.

I nominate uh Chair Coletto for another term as well.

Um, is that a second?

Second.

Um all in favor, please say aye.

Aye, oppose abstentions.

I nominate David for his vice chair.

Second.

For a year.

Yusuf's not here.

Okay.

Uh all those in favor, please say aye.

Aye.

I oppose abstentions.

Uh passes.

So we have our chair and vice chair.

Um are there any member comments, ideas, and questions?

Uh is there any public comment on items not in the agenda?

Thank you, Chair.

No, we do not have any.

Okay.

Well, thank you, everyone.

We are adjourned.

Very good.

Thank you, thank you.